RBS Company’s top selling item is a Pen Set. RBS Company expects to sell 100 Pen Sets per month for the next 12 months. RBS Company purchases the Pen Sets from a supplier for $25 dollars each, and incurs a cost of $50 dollars for each order that they place. RBS Company estimates that their inventory carrying cost is 20% annually. what is RBS Company’s EOQ for pen set?

EOQ = 155 units

Explanation:

Economic order quantity is the quantity at which business incur minimum cost. This is the level of order where the holding cost equals to the ordering cost of the business.

As per given data

Annual Demand = 100 per week x 12 weeks in a year = 1,200 bolts

Ordering cost = $50

Carrying cost = $25 x 20% = $5

EOQ =  

EOQ =

EOQ = 154.92 units = 155 units

answer; capital structure decision;